Business Finance assignment Research Paper Example | Topics and Well Written Essays - 1750 words

Business Finance assignment - Research Paper Example The investor in question believed that smaller firms are less risky compared to larger firms. It is always important to diversify portfolios in order to spread the idea of the risks. Comparing with the 2011 beta or 1.08, the above beta of 1.06 seems to provide a good measure of how the stock movers relative to the broader Australian market index. The function of beta is to measure the risk of stock in relation to the overall market. From the above calculations, it is evident that the selected portfolios are less risky and have diversified the possible risks. On this basis, it is therefore true to say that the investor is likely to have very little loss and fear of risks associated with portfolios. The beta calculated from the investment portfolios is a clear indication of how the portfolio has diversified risks as well as low risk compared to the Australian Market index in 2011. The financial investment was very successful providing additional profit or income of approximately $7,110. In addition to the income received from the portfolio, there is no doubt that the risks associated with the same are too low. For instance, the beta obtained for the overall portfolio clearly indicates that the selected investment portfolios have widespread risks besides being lower than the 2011 Australian Market index beta. When portfolios have spread risks as well as low risks then it is advisable to engage in the investment. The above case scenario is a good example of investment portfolio, which was not only of viable income in terms of increased revenue or income but also given the fact that there were low risks involved, which in any case were widely spread across different firms from different industries and sizes. Indeed, the investment portfolio was a successful